So for this blog I am going to paraphrase something that I read recently. Sorry for the lack of originality, but in my view it is just that good. Recessions are times of creative destruction. From them rise new ways of doing things faster, better and cheaper. And during these times, those resistant to change drift off into obsolescence.

That could be why I find myself so optimistic, even after a 2008 that most would call less than enjoyable. From my vantage point in helping shape the direction and vision of The Receivables Exchange, I see change actively happening that will make the world of business a better place. The last receivable that was listed and traded on our Exchange sold in less than two hours. If you had asked me 10 years ago when I was a small business operator, whether a mechanism - other than a credit card or a line of credit - would exist for driving capital in less than two hours into your business, I would've said no way. The problem is, as those of us who have operated a business know, often times, if not most times, and particularly during these times, credit cards and lines are not a viable option, and if they are, they are rarely large enough to suffice as the complete working capital management tool that all business operators need.

How many times have you heard of a company succeeding their way out of business? I've heard it countless times. And why does that happen? Because, in my opinion, of resistance to change in the credit and capital markets. Companies only succeed their way out of business when they cannot access capital fast enough to maintain their growth. Working Capital, like blood for the body, like fuel for the engine - is what enables growth.

Today's New York Times said that his recession will not end until the credit crisis ends. We couldn't agree more. But we would add that change is needed unless we want to see a return of tight capital markets as the result of what is clearly a fragile capital market. Working capital will need to be accessed via mechanisms that are faster, better and cheaper.

So here we are, in the midst of creative destruction. The good news as I see it is that during all of this upheaval, you as the small and medium business owner get to watch tired and outdated mechanisms for accessing working capital drift into obsolescence. So for those of you using the Exchange, I leave you with this prediction for 2009: You will spend less time looking for working capital and more time growing and managing your business.

Happy New Year and see you in 2009.

At the risk of sounding like an overzealous contrarian or simply in denial, I continue to posit that the current economic turmoil is the greatest long-term opportunity that this country and the world have seen since the Industrial Revolution. However this time instead of water wheels and the steam engine, we are talking about electric cars, alternative energy and clean energy, just to name a few innovations.

In somewhat eerie irony, the internal combustion engine, one of the primary drivers of the Industrial Revolution, is going the way of the buggy whip. Quite frankly, you really shouldn't be that surprised. The awesome changes over the last two decades of how business is conducted, with huge and continuing gains in productivity and information share had to have some kind of social and commercial consequence. Nothing happens in a vacuum. So instead of child labor laws and unionization, the focus is on universal healthcare and socially responsible business. Regardless of your position on all of these initiatives (and I am not offering one here), I think we can all agree that the current momentum in the United States is for change.

However, I'm not sure the word change is what we are talking about here. My word for it is upgrade. I think we are experiencing the Great American Upgrade. Rightly or wrongly, it looks like our roads, bridges and various elements of infrastructure are about to get major upgrades via a one Trillion (yes with a capital T) economic stimulus package (again I am not offering an opinion on this). As an aside, has anyone else noticed that the Government is now borrowing money at 0% these days? The 30-year is around 3%.

Let me repeat that. The risk-free rate at which the government is borrowing money is somewhere between 0% and 3%. We are likely to pay for this in the form of massive inflation, but in the short term the U.S. Government has access to all the cash it needs at historically low rates. Let's just hope that we are not swapping a mortgage bubble for a Fed bubble. That would be very bad indeed.

The car industry is about to get an upgrade to clean, efficient and alternative energy sources. I like to think that we here at the Receivables Exchange are doing our part to upgrade the commercial finance options available to small and midsize businesses. Then, you have biomedical advancements that are mind boggling. While I am not even a knowledgeable layman in this segment of our economy, as a casual observer, it seems to me that the pace of innovation in the biomedical sciences (genomics, etc.) is only accelerating.

Everywhere you look, innovation and breakthrough is the norm. It makes me wonder if we should even call breakthroughs, breakthroughs anymore.  That said, this is going to be one hell of a ride over the next 5 to 10 years. Most importantly, unlike the Industrial Revolution, information share is instantaneous and ubiquitous, which serves as an accelerator for innovation. For the record, I am not suggesting that this upgrading process is going to be enjoyable. The current  and constant economic turmoil is exhausting. Some of the greatest businesspeople I know seem distraught and defeated in this environment.

 However, some things never change, like the annual return of the holiday season. So during this time of uncertainty, upheaval and perhaps permanent change, we get to enjoy, albeit briefly, some of the few constants that surround us.

Nic Perkin is co-founder and President of The Receivables Exchange. The Exchange is the world's first online marketplace for real-time trading of accounts receivable.

We, at The Receivables Exchange, were excited to announce earlier this week a groundbreaking partnership with Ariba, Inc. The relationship promises to change the commercial finance market in U.S. It will provide Aribaʼs Supplier Network with a new way to beat the credit crunch and access competitively priced capital. The Receivables Exchange does this by connecting  suppliers (member sellers) to a global network of accredited investors (receivables buyers) who compete in a real-time auction marketplace to buy their receivables. You can read more about The Receivables Exchange and Ariba relationship here. 

Nic Perkin is co-founder and President of The Receivables Exchange. The Exchange is the world's first online marketplace for real-time trading of accounts receivable.

Like the rest of the World, I've been trying to wrap my head around just exactly how we have gotten ourselves into this credit situation that we now find ourselves. I keep wondering about what history will say about these times. Assuming you don't believe that the end of the world is nigh, I personally can't remember a time when more opportunity existed. Hedge funds have an estimated $400 billion in cash out of somewhere around $1.5 to $2 trillion under management. The Fed is pumping cash via fire hose into financial institutions, and in many cases it's just sitting there waiting for asset prices to stabilize, which they will. So at some point or another, this cash is going to get put to work. The smart money is putting it to work now.

1. The government legislatively encourages mortgage lenders to loosen standards in the late 90s.

2. World-wide commodity prices begin to rise, namely oil and subsequently food (driven by a number of factors).

3. The average consumer suddenly finds themselves making the same real wages with increased food and gas prices.

4. The average consumer has easy access to credit and uses it (see No. 1 above) - mortgages, home equity lines, etc.

5. There is an explosion in the credit markets that's driven by consumer need more than greed (see No. 3 above).

6. FAS 157 (Fair Value Accounting) is enacted in November 2007, and the write downs begin.

7. The credit markets freeze from the decay of trust between financial institutions, which is the direct result of shocking write downs.

8. The combination of the freezing of markets and FAS 157 sends write downs spiraling out of control.

9. The total freeze in the credit markets crashes the housing market and negatively impacts GDP.

10. You are here.

No doubt, I missing various key points above, but that is my take on it from everything I have read and observed.  Due to the current market conditions, there is a push to suspend FAS 157, or at least amend it. In fact the Emergency Economic Stabilization Act of 2008 specifically authorizes the SEC to suspend FAS 157 (section 132 of the Act) per a review of FAS 157.  Furthermore, the Emergency Economic Stabilization Act requires the SEC, the Fed and the Treasury to conduct a review of the effects of FAS 157 and report back to Congress within 90 days. The study began on Oct. 7, 2008. So, as I see it, somewhere around January to February, FAS 157 will get amended or suspended, the write down pain will subside, the credit markets will begin to thaw in earnest and the rebuilding process will begin. Again, an oversimplification.

Nic Perkin is co-founder and President of The Receivables Exchange. The Exchange is the world's first online marketplace for real-time trading of accounts receivable.

The Receivables Exchange was the subject of a very positive New York Times article yesterday. The article entitled, "An Online Market for Selling I.O.U.'s," said this about the Exchange: "The site provides a much-needed financing option for companies that are finding the doors locked at traditional credit markets." I hope you'll read the article and the 30-plus comments posted about it, and let me know what you think about The Receivables Exchange as a working capital management tool.

Nic Perkin is co-founder and President of The Receivables Exchange. The Exchange is the world's first online marketplace for real-time trading of accounts receivable.

  On Monday, November 17^th, The Receivables Exchange will launch. This is the culmination of two years of hard work, millions of investment dollars and remarkable amounts of sacrifice by the 35+ team members who have worked tirelessly every day to make it happen.  Here at the Exchange, our mantra is that the national and global impact of the Exchange will help thousands of companies and millions of employees and their families achieve the American dream.

It will bring flexible and competitive working capital to Main Street at the moment when Main Street needs it most. The financial crisis has revealed to all of us the disparity between the finance options that small and medium business owners need to manage and grow their business and the options that they actually have. Perhaps the easiest way to look at it is this, only things that are old, rigid and inflexible break. I think it is fair to say that today, our credit markets are broken. In contrast, things that are flexible bend - they absorb shock and they return to equilibrium. The Receivables Exchange, as a product, is designed to be a flexible working capital solution for small and medium-sized businesses with as much transparency as possible.  Companies on the Exchange are evaluated based upon their specific performance and not penalized for shocks and disruptions in non-related industries. They use the Exchange only when they need it, without personal guarantees, without all-asset liens and without their capital provider interacting with their hard-earned customers.

Not to over-simplify these complex times, but in business, there seems to me to be two types of change, voluntary and involuntary. The advent of the Web and its ubiquitous penetration is one of the greatest examples of voluntary change that subsequently led to a decade of countless instances of involuntary change. We are probably all in agreement that the near collapse of our financial system was not something that any one of us wanted or that we would have asked for as a catalyst for change. Unfortunately, tomorrow, like yesterday, you will wake up and the credit crisis will still be here.

This time, however, as the owner or manager of a small or medium business, you will wake up with a new tool to make your company more competitive, to help you initiate a new drive toward progress and ultimately, to grow your business.

Nic Perkin is co-founder and President of The Receivables Exchange. The Exchange is the world's first online marketplace for real-time trading of accounts receivable.

I wanted to talk a little today about why the World needs a flexible, transparent and efficient marketplace for the buying and selling of receivables.  In my opinion, the answer is straightforward. Think for a moment about how much has changed in the last 20 years, specifically all that has changed in the way that people do business. It wasn't too long ago that the fax machine seemed like an amazing concept. I can remember showing a managing director at an investment bank where I worked how to attach a Word document to an email. He thought it was the most amazing thing he had ever seen.

Now fast forward:  cell phones, PDAs, total and complete connectivity. Then, ask yourself these questions. What has changed in the way that small and medium businesses secure working capital over the last 20 years? What about going back to your parent's generation? Or your grandparent's generation? It's not a trick question. The answer is nothing. Nothing has changed. Think about that statement for a minute.

In today's electronic and connected world, a Wichita business can source, contract and do business with a Moravian company that is selling a product with parts from Singapore. And yet, the way the Wichita company secures its growth capital hasn't changed in more than 100 years.

Innovation and associated productivity gains have affected nearly every aspect of life. Working capital management, in our opinion, should be no different. In today's complex and often intertwined financial markets, The Receivables Exchange returns business in its most basic form by providing a marketplace where businesses can convert their receivables into competitively-priced working capital. In fact, the largest source and use of capital for businesses around the world is trade credit. Trade credit is the standard push and pull between businesses - the push of payables and the pull of receivables. It's what working capital management is all about. Companies need cash to create their goods and services, so they push out what they owe (payables) as far as they can and pull in as fast as possible what they are owed (receivables). In doing this, they manage the cash position of their business, hopefully in a manner that allows for growth. 

The number one reason companies go out of business is not lack of market opportunity. It is poor working capital management. Turn on CNBC and you can see how critical working capital management is. The lock down in the commercial paper market is causing all kinds of problems and is putting our economy at risk. Commercial paper as a short term financing mechanism is really only available to the largest of players, and even they can't get the funding they currently need.  It's become so bad that the government has had to step in and insure paper so investors would begin doing business again. But what about the 70% of the GDP that doesn't have access to the commercial paper market? Credit card limits are getting halved as rates skyrocket, and other options are either getting more expensive or quickly evaporating.

I could go on and on about all the pressures that SMBs are under currently, which brings me to a conclusion that we, at The Receivables Exchange, believe is solid. A centralized marketplace where Small and Medium-size companies can get competitively-priced working capital - if and when they need it - will create productivity gains for SMB owners and managers.

Nic Perkin is co-founder and President of The Receivables Exchange. The Exchange is the world's first online marketplace for real-time trading of accounts receivable.

One of the truly amazing things about the current credit crisis is how little of the opinion out there is truly informed. That should be the definition of "panic" - namely, uninformed people making decisions. We all know the old adage, and I paraphrase, "Those that forget the past are destined to repeat it." As I said in my last blog, the good news for the USA and the world is that the people leading us out of this (namely Paulson and Bernanke) know the past extremely well, and have no intention of repeating it on their watch. Of that I am fairly certain.

 Everyone is itching to call this a "crash." As one of my Wall Street contacts in the credit space told me, "If you think the stock market is bad, you should see the credit market." This week might have been the equalizer on that front as trillions more went flying out the window. The media is now out and about looking for people to mark as culprits in all of this, a sort of electronic version of stoning. This past week people made the decision to sell their 401Ks, leading to one the greatest mutual-fund-driven stock sales in history. Pretty fascinating stuff if you think about it. Everywhere you look people are looking at assets and thinking it must be worth less now than last month. I'm tempted to call the breeders I recently bought a Labrador from and bargain them down as well. That lab can't be worth what it was last month; everything has changed, right? Hopefully you are picking up on my sarcasm here. Now it is extremely unfortunate that the Rescue Bill as we now call last week's bailout took so long. Each day that the negotiations dragged on was one less day the credit markets had to begin thawing. So now even Governor Schwarzenegger is saying that due to locked down credit markets, the great state of California needs federal cash to manage its working capital requirements, and some economists are projecting a 4-5% decrease in GDP for 2009. 

The great thing about alarmists is the amount of opportunity they create as they run around sounding the alarm. America is doing business as usual, albeit in some sectors at a reduced pace and thus requiring some reorganization. Some people are hurting for sure. Those with the greatest sensitivities to increases in LIBOR and overall rate increases that can effect consumer buy decisions are definitely having a tough time. Those with the balance sheet to weather this storm will emerge stronger than ever and be part of the growth in the future.

So what can we learn from all of this. My view is that the main take-away is that transparency is good. What got us into this mess in the first place is the creation of financial products that did not provide transparency down to the electron level. By the time the market got into Inverse Floater CMO Traunches, we were in big trouble. The CDS market is a little scary too, quite frankly, although it looks like the CME is going to create the necessary standardization and transparency to make that market more transparent and efficient as well, and in the process should do extremely well.

And then there is what we are doing here at The Receivables Exchange, namely bringing transparency and standardization to the receivables finance market. I am more convinced than ever that as companies can access working and growth capital via a transparent and efficient market, using their most readily available asset, their commercial receivables, that the productivity gains we have seen all over the economy over the last 20 years will finally come to working capital management.

Nic Perkin is co-founder and President of The Receivables Exchange. The Exchange is the world's first online marketplace for real-time trading of accounts receivable.

Personally, I'm a little tired of living through historic moments in history. I find it hard not to look back on the 1990s,  which after  the Wall in Berlin came down, had little to no historical moments. The Savings and Loan Crisis cost American taxpayers around $160 billion. The drop in the S&P Monday cost Americans around a Trillion, although much of that was pared Tuesday. That said, here we are in a historic moment - The Credit Crisis of 2008. Congress is in chaos, everyone is running around pointing fingers at each other and Henry Paulson would pull out his hair if he could.  So where do we go from here? Well, Congress is going to have to pass something. If they don't, it is hard to even imagine what the World will look like. But even when Congress does act, the credit markets are going to take time to work transparency back into the system. Interbank lending rates have skyrocketed and the cost is being passed to the end user, be that house buyer or business operator. The Fed is pouring billions of dollars into the system hoping to unclog lending arteries and it is just not trickling through, because fundamentally, this all comes down to one thing - trust in your counterparty. Same thing happened on a much smaller level during the Long Term Capital Management (LTCM) debacle. However in that instance Alan Greenspan and Gerry Corrigan, NY Fed President, called up everyone personally on the banking side, and made it pretty clear that they needed to start trusting their counterparties and doing business, or when the gang got back together, those that didn't, wouldn't be in the gang. In this credit crisis, the problem is too big. Wall Street no longer exists as it existed 6 months ago - or two weeks ago for that matter. Great Wall Street brands, Bear, Lehman and Merrill are gone. Great banking brands, WaMu and Wachovia, are also gone. More will go - and worldwide many more. We are in fact living history - unfortunately, in this case.

So what are President Bush, Bernanke, Paulson and much of Congress so worried about? Simply, they are worried about the ripple effects of what is a Wall Street problem infecting and spreading into Main Street. It's already happening. LIBOR is posting historic increases - and increased cost of capital for financial groups means increased cost of capital to businesses, if in fact you can get access to capital, which in turn reduces projects and risk taking by businesses, which in turn reduces GDP growth. In its most basic form, a shock to the system that then ripples out and creates longterm consequences to economic growth. With that said, it is my view that it does not need to be that way. Why should a growing business in Alternative Energy have an increased cost of capital because of a Credit Shock that has absolutely nothing to do with that business? Why should a business pay a cost of capital that is anything but the idiosyncratic cost of capital for that specific business? Why? Because in today's World access to capital is not company specific. It's not even sector or industry specific. In today's World if you are in business, regardless of your specific performance, your sector performance or your industry performance, you are in it with the rest of them -  a rising tide floats all boats, so to speak. But that is not the way it should be. Access to capital should be idiosyncratic; it should be on the company level, always, and regardless of company size. Not only that, but by introducing portfolio theory to the providers of capital and giving them risk diversification, cost of capital should be the lowest that the market can actually bear, it should be efficient, it should be flexible, and it should move only based on how your company performs and the specific risks associated with your business. That is where the world of working capital is going, with future shocks to the system contained and localized.

 Nic Perkin is co-founder and President of The Receivables Exchange. The Exchange is the world's first online marketplace for real-time trading of accounts receivable.